Skip Navigation

FTE Reduction Exemptions for PPP Loan Forgiveness

There are a few situations where borrowers are exempt from reductions in loan forgiveness based on reductions in full-time equivalent (FTE) employees. The first of these FTE reduction exemptions can be found at the bottom of page 3 of Form 3508 on PPP Schedule A.

fte reduction exemptions

When Do You Need to Compute FTE Reductions?

You do not have to compute reductions in FTEs if you meet any of the following criteria:

  1. You have no reduction in employees or average paid hours from 1/1/2020 compared to the end of the Covered Period
  2. You meet FTE Reduction Safe Harbor 1
  3. You meet FTE Reduction Safe Harbor 2

FTE Reduction Exemption Safe Harbor 1

Provides a safe harbor from reductions in forgiveness, based on reductions in FTE employees, for borrowers that are unable to return to the same level of business activity prior to February 15, 2020, due to compliance with requirements/guidance between March 1, 2020, and December 31, 2020, by the:

  • Secretary of Health and Human Services
  • Director of the Centers for Disease Control and Prevention
  • Occupational Safety and Health Administration, related to worker or customer safety requirements associated with COVID–19

Safe Harbor 2

Provides a safe harbor from reductions in forgiveness, based on reductions in full-time equivalent employees if:

  • The Borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020


  • The Borrower then restored its FTE employee levels by not later than December 31, 2020, to its FTE employee levels in the Borrower’s pay period that included February 15, 2020

The Six FTE Reduction Exemptions

There are six additional FTE reduction exemptions to protect borrowers. If there are FTE reductions during the Covered Period for any of the following reasons, the Borrower is exempt from reductions in loan forgiveness:

  1. The Borrower made a good-faith, written offer to rehire an employee, which was rejected by the employee
  2. Were fired for cause
  3. Voluntarily resigned
  4. Voluntarily requested and received a reduction of their hours
  5. The Borrower made a good faith, written offer to restore any reduction in hours at the same salary or wages, but the employee rejected
  6. The Borrower was unable to hire similarly qualified employees for unfilled positions by December 31, 2020

Any full-time equivalent employee reductions in these cases do not reduce the Borrower’s loan forgiveness. When calculating your FTEs, do not include reductions that arose from any of these six reasons.

Contact Us for Help in Completing Your PPP Loan Forgiveness Application

If you need assistance filling out your PPP loan forgiveness application form, would like us to review your application, or have any other questions or concerns, we’re here to help. Please email

Author: Megan O’Donnell

This entry was posted on Thursday, November 19th, 2020 at 1:21 pm. Both comments and pings are currently closed.

Related Articles